Will Gas Prices Go Up? Saudi Arabia to Cut Production

What has been made apparent by OPEC and the IEA is that oil demand growth is slowing, while oil supply, most notably from the USA is rising to record levels at a rapid rate.

"We need to be very accurate here, each word matters", Putin told reporters in Singapore. Saudi Arabia said on Monday producers need to cut 1 million barrels a day from October levels.

The IEA also cut its forecast for demand for OPEC crude by 300,000 bpd in 2019.

US bank Morgan Stanley said in a note on Wednesday that China's economic "conditions deteriorated materially" in the third quarter of 2018, while analysts at Capital Economics said China's "near-term economic outlook still remains downbeat". An industry report was said to show USA stockpiles rose 8.8 million barrels last week, more than double the increase forecast in a Bloomberg survey before government data due on Thursday.

US light crude fell $2.15, or 3.7 per cent, to $57.78, hitting its lowest level since December 2017.

Traders said recent weakness in equities has fanned concerns about global growth, which is also contributing to declines in oil.

Though the price dropped later to $84.75, per barrel, following the decision of the International Monetary Fund (IMF) to lower its forecasts, among other issues, the rise in price of crude was not an issue to be forgotten soon. This in turn has offered a bounce for oil prices with Brent crude jumping 1.4%, potentially establishing a near term bottom. OPEC and its partners, meanwhile, are said to be considering a bigger-than-anticipated cut in production.

One of the three sources said a minimum cut of 1 million bpd was being considered and it could be larger than 1.4 million bpd.

He said, "It's not right for market participants to react to any one-off fluctuations", and he added that the oil market doesn't fully understand the fallout from sanctions against Iran.

The producers, known informally as "OPEC+", will convene in the first week of December in Vienna to decide further steps.

A lift in USA sanctions on Iran, increased shale oil production coupled with predictions of reduced world demand for oil has kept prices in trenches.

"This will, in our view, cap any upside above $85 per barrel (for oil prices)", said Jon Andersson, head of commodities at Vontobel Asset Management. We remember that the oil price was sharply rising in the same way, now it is going down.

Even as the Saudis floated the possibility of a cut in production, the selling has not abated.

The Russian Energy Ministry did not immediately reply to a Reuters request for a comment.

  • Anthony Vega